Tax revenues miss again, Kasich says Ohio on verge of recession

Jim Siegel & JD Malone
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Updated Dec 7, 2016 at 6:34 PM

Soon after Gov. John Kasich told the Ohio House on Tuesday that “we are on the verge of a recession in our state,” the latest state tax receipts showed revenue continuing to significantly lag behind estimates.

Total tax revenue for November came in $99 million below estimates, putting it off the mark by 5 percent, including income taxes at more than 10 percent under projections. Revenue was off by $88 million, or 4.7 percent, in October.

The months of poor performance have dragged down state revenue to nearly 3 percent below estimates for the year, or $259 million. The fiscal year runs through June 30, 2017.

The Kasich administration, including Budget Director Tim Keen, has been putting out warnings that the next two-year budget is going to be tight. Keen has said he expects the cushion built into the current budget to be enough to cover any revenue shortages this year without needing to make adjustments, but the downward revenue trend will continue to push future estimates lower.

One Columbus economist isn't ready to use the word recession, but he sees the governor's point.

"I think employment growth in the coming year will be significantly slower than average,” said Bill Lafayette. “It is worrisome if this trend continues, and I think it will."

He pointed to dramatically lower manufacturing employment growth in the state: 0.2 percent so far this year, compared to 1.7 percent last year. Retail hiring also is weak, he said.

Since 2010, Ohio jobs have grown by 9.7 percent compared to 11.7 percent for the U.S. as a whole. Central Ohio is the state's jobs oasis, with employment having grown by 16.1 percent since 2010.

Slowing tax revenue is just one issue impacting the funding available for the next two-year budget. Kasich and lawmakers also must deal with the loss of federal Medicaid dollars — and that’s not related to any changes to Obamacare that President-elect Donald Trump and Congress may make.

Federal regulators are putting an end to Ohio charging sales tax on Medicaid managed-care organizations, an action that has allowed Ohio to collect hundreds of millions of dollars per year in federal Medicaid matching funds. That will cause an estimated $1.1 billion state funding loss in the next two-year budget, while local counties and transit authorities stand to lose another $400 million.